Asset Management Firms Also Actively Participate in IPOs... Becoming a Detour for High Net-Worth Individuals?

Significant Increase in Domestic Fund Managers and Other Institutions Participating in Kakao Games Subscription
Traditional Institutions More Passive Than During SK Biopharm... "Investment Risk Is High"
Suspicions of High-Net-Worth Individuals Using Indirect Channels... "No Problem Because It's Indirect"

On the first day of Kakao Games' IPO subscription on the 1st, individual investors are waiting to subscribe at the Samsung Securities branch in Mapo-gu, Seoul. (Photo by Samsung Securities)

[Asia Economy Reporter Minwoo Lee] Participation from small specialized private equity firms and investment advisory firms has increased in the subscription for Kakao Games' IPO shares, which sparked a record-breaking public offering. It is pointed out that high-net-worth individuals are circumventing through specialized private equity funds to receive more new shares.

According to the securities firms managing Kakao Games' listing as of the 3rd, 1,745 institutional investors participated in the demand forecast for institutional investors held on the 26th and 27th of last month. This is the largest number ever. Among them, 621 domestic asset management firms accounted for 35.5% of the total, surpassing 407 foreign institutions. Next, other institutional investors including investment advisory firms ranked second with 477 participants. Compared to the SK Biopharm subscription in June, which also sparked great interest, with 454 asset management firms and 272 other institutions, this is a significant increase.

Industry insiders analyze that high-net-worth individuals utilized these institutions as a bypass method, aiming to receive more allocation of IPO shares since specialized private equity firms or investment advisory firms receive more shares than general investors. High-net-worth individuals are thus treated as institutions by circumventing through small private equity funds despite being individuals.

On the other hand, traditional institutions showed relatively passive investment in Kakao Games compared to SK Biopharm. Traditional institutional investors such as pension funds, asset management firms (proprietary accounts), banks, and insurance companies numbered 200, which is even fewer than the 208 during the SK Biopharm subscription.

This trend was also evident in the mandatory lock-up agreement applications. In the SK Biopharm demand forecast, 81.15% of the total application volume applied for mandatory lock-up agreements. Among the lock-up applications, 51% chose the longest period of 6 months. This indicates a judgment to secure more new shares even if restricted from selling stocks for six months.

In contrast, the mandatory lock-up agreement application rate for Kakao Games subscription was only 58.59%. Among these, only 13% chose the 6-month lock-up period. This suggests that investors viewed Kakao Games as relatively riskier compared to SK Biopharm. As traditional institutional investors were passive, and participation from specialized private equity firms and investment advisory firms surged, suspicions of high-net-worth individuals' circumvention investments have been raised.

However, since this is not illegal, some view it as not problematic. It is said that legally established institutions complied with regulations related to securities underwriting when applying for subscription volumes. A financial investment industry official said, "Since all procedures were legally followed, the operating entity can only be regarded as an institution, not an individual."

This content was produced with the assistance of AI translation services.